IGCSE Business: Motivating employees (Cambridge 0264) – Revision Notes

These notes condense section 2.4 (Motivating employees) of the Cambridge IGCSE Business 0264 syllabus for examination in 2027, 2028 and 2029. For full explanations and worked cases, read the study guide first, then test yourself with the practice questions. The course hub, the printable checklist and the free diagnostics help you find weak spots. Both papers draw on all the subject content, so be ready to use these ideas in a short answer and in a case study.

2.4.1 Key definitions

Term	Meaning
Motivation	The desire and willingness to put effort into a job
Well-motivated workforce	Employees who work willingly, stay and accept new ways of working
Labour productivity	Output per worker (or per hour worked)
Absenteeism	Employees missing work without good reason
Labour turnover	The rate at which employees leave and are replaced

Why people work

• Money to pay for needs and wants.
• Job security and a regular income.
• Social contact and belonging.
• Status, respect and recognition.
• Job satisfaction and a sense of achievement.
• A chance to learn, use skills and progress.

Use at least two different reasons in an answer. “Money” alone gains little.

The four benefits of a well-motivated workforce

Benefit	Link to cost or profit
Improved labour productivity	More output for the same labour cost, so cost per unit falls
Reduced absenteeism	Fewer gaps in production or service, less cover needed
Lower labour turnover	Lower recruitment, selection and training costs
Greater willingness to accept change / new methods of working	Faster and smoother introduction of new technology or methods

Standard formulas

Measure	Standard form
Labour productivity	Output ÷ number of workers
Labour turnover (%)	Leavers in the period ÷ average staff × 100
Absenteeism rate (%)	Days lost ÷ days that could have been worked × 100

The syllabus formulas list gives labour productivity as output per period divided by number of employees. The turnover and absenteeism forms are the usual standard forms, not printed in section 2.4.

Quick reminder. Rilkin Textiles produced 9,000 metres of cloth with 25 weavers and had 6 leavers from an average of 48 staff. Productivity = 9,000 ÷ 25 = 360 metres per weaver. Turnover = 6 ÷ 48 × 100 = 12.5%.

The three theories at a glance

Maslow

Five levels, lowest first. Each level drives behaviour once the one beneath is mostly met.

Level	At work
Physiological	Wage enough to live on
Safety	Secure contract, safe conditions
Social	Teamwork, friendly workplace
Esteem	Praise, status, titles, promotion
Self-actualisation	Challenge, creativity, reaching potential

Method in steps:

1. Decide which level the worker is at from clues in the stem.
2. Choose something that meets that level.
3. Say why a lower-level reward would add little.

Taylor

• Workers are motivated mainly by money.
• Break the job into tasks, find the best method, train, pay by output.
• Typical link: piece-rate and bonuses.
• Weakness: ignores boredom, teamwork and the quality of the work.

Herzberg

Hygiene factors	Motivators
Pay, conditions, job security, policy, supervision	Achievement, recognition, responsibility, the work itself, advancement
Stop dissatisfaction if good	Create satisfaction and effort
Do not motivate alone	Need hygiene factors to be fair first

Must-know distinctions between theories

• Taylor says pay motivates. Herzberg says pay is a hygiene factor.
• Maslow gives a ladder of needs. Herzberg gives two groups of factors.
• Maslow’s esteem and self-actualisation levels sit close to Herzberg’s motivators.

2.4.2 Financial methods

Method	Basis of payment	Main plus	Main minus
Time-based	Hours worked	Simple, steady	No reward for speed
Piece-rate	Units produced	Rewards output	Quality may fall, pay uncertain
Salary	Fixed annual sum	Security	Not linked to effort
Bonus	Target met	Rewards results	Seen as automatic over time
Commission	Percentage of sales	Strong sales drive	Pushy selling, unstable income
Profit sharing	Share of profit	Loyalty, team spirit	Weak link to one person’s effort, delay
Fringe benefits	Non-cash extras	Valued perks	Cost, not wanted equally by all

Pay calculations (method in steps)

1. Write the rate and the quantity (hours, units, sales or profit).
2. Multiply, or take the percentage.
3. Add any basic pay.
4. State the answer with units, and say what it means if the question asks.

Examples with Gantry Lane Printers:

• Time-based: 35 hours × 11 = 385.
• Piece-rate: 250 bundles of leaflets at 1.20 each = 250 × 1.20 = 300.
• Commission: 6% of 18,000 sales = 1,080.
• Profit sharing: 8% of a 150,000 profit = 12,000, shared by 20 staff = 600 each.
• Salary: 2,400 a month × 12 = 28,800 a year.

Non-financial methods

Method	What it is	Link to theory	Limit
Job enrichment	More responsibility and challenge	Herzberg motivators, Maslow self-actualisation	Needs training, may need higher pay
Job rotation	Moving between tasks at the same level	Reduces boredom	Adds no responsibility, training time
Training	Developing skills	Esteem, growth	Cost, staff may leave
Opportunities for promotion	A career path	Esteem, achievement	Few posts, disappointment
Praise	Verbal recognition	Esteem	Must be sincere
Employee of the month	Public award	Esteem, recognition	Rivalry, same few winners

Recommend and justify

Method in steps:

1. Identify the problem in the stem (low output, high turnover, resistance to change, boredom).
2. Pick one method that fits.
3. Explain how it works with a detail from the case.
4. Give a limit or a comparison with another method.
5. Make a clear final decision.

Good judgements rest on the workers’ circumstances: age, type of job, current pay, and the business’s size and cash position. A small business with little cash may prefer praise and flexible duties to a costly bonus scheme.

Worked reminder: applying a theory

Rilkin Textiles pays its weavers well and the factory is clean and safe. Weavers say the job is dull and nobody notices good work. Several have left for jobs paying less.

• Herzberg: pay and conditions are hygiene factors and are already fair. The missing piece is motivators, so add responsibility and recognition.
• Maslow: lower needs are met. The weavers lack esteem and self-actualisation, so use praise, promotion routes and more challenging tasks.
• Taylor: more pay or piece-rate would be the response, but the evidence in the case suggests money is not the problem.

A short, strong answer names the theory, picks out the clue from the case, and links it to one method. It then states a limit, for example that enrichment needs training time.

Matching problems to methods

Problem in the stem	Likely suitable method	Reason
Repetitive work, boredom	Job rotation or job enrichment	Adds variety or responsibility
Staff need to be pushed to sell	Commission	Pay moves with sales
Output counts easily by unit	Piece-rate	Rewards each unit made
Skilled staff leaving for rivals	Training, promotion, fringe benefits	Gives a reason to stay
Staff resist new machines	Profit sharing, training, involvement	Shows staff gain from change
Very little cash to spend	Praise, employee of the month	Low cost
Team effort matters more than individual effort	Profit sharing or a team bonus	Rewards cooperation

Things to say in evaluation

• The best method depends on the workers: a student on holiday work may want cash, while a long-serving supervisor may want responsibility.
• Cost matters. A bonus or profit-sharing scheme is paid from money the business may need elsewhere.
• Effects take time. Training and promotion pay off over months, a bonus works faster.
• Methods can be combined. Fair pay (the hygiene factor) plus recognition often works better than either alone.
• Measure success afterwards using productivity, absenteeism and turnover.

Quick self-test

1. State two reasons why people work other than money.
2. Name the four benefits of a well-motivated workforce listed in the syllabus.
3. Gantry Lane Printers pays 11 an hour. Calculate pay for 35 hours.
4. Calculate labour turnover when 6 of an average 48 staff leave in a year.
5. Which of Herzberg’s two groups contains pay?
6. Name the top level of Maslow’s hierarchy.
7. Which theorist is associated with piece-rate pay as the main motivator?
8. Distinguish between job rotation and job enrichment.
9. Calculate absenteeism for 30 staff who lost 36 days out of 20 working days each.
10. Name two non-financial methods that could meet esteem needs.

Answers

1. Any two from security, social contact, status, job satisfaction, using skills.
2. Improved labour productivity, reduced absenteeism, lower labour turnover, greater willingness to accept change or new methods of working.
3. 35 × 11 = 385.
4. 6 ÷ 48 × 100 = 12.5%.
5. Hygiene factors.
6. Self-actualisation.
7. Taylor.
8. Rotation moves workers between tasks at the same level. Enrichment gives more responsibility and challenge.
9. 36 ÷ (30 × 20) × 100 = 6%.
10. Any two from praise, employee of the month, promotion opportunities.

Where marks are usually lost

• Giving only one reason for why people work, or only “money”.
• Describing a method without applying it to the business in the stem.
• Confusing a bonus with commission or with profit sharing.
• Writing that hygiene factors motivate.
• Leaving out units or the working in a pay calculation.
• Describing job rotation as a promotion.
• Listing advantages only, with no disadvantage or limit.
• Recommending a method with no reason why it beats the alternative.

Frequently asked questions

What is the difference between a bonus, commission and profit sharing? A bonus is an extra payment for meeting a target. Commission is a percentage of the sales a person makes, and profit sharing gives employees a share of the business’s profit. Confusing these three methods is a common way to lose marks.

How do you calculate the absenteeism rate? Absenteeism rate (%) = days lost ÷ days that could have been worked × 100. This is the usual standard form; the Cambridge IGCSE Business 0264 formulas list gives only labour productivity, as output per period divided by number of employees.

Which motivation methods suit a business with very little cash? Low-cost non-financial methods such as praise and employee of the month are the most realistic choices. A small business short of cash may prefer praise and flexible duties to a costly bonus or profit-sharing scheme.

How can a business tell whether a motivation method has worked? It can measure labour productivity, absenteeism and labour turnover after the change and compare them with the figures before. Effects can take time, since training and promotion pay off over months while a bonus works faster.

Can motivation methods be combined? Yes. Fair pay, which Herzberg treats as a hygiene factor, combined with recognition often works better than either on its own.

Official syllabus

These notes follow section 2.4 of the Cambridge IGCSE Business 0264 syllabus for examination in 2027, 2028 and 2029, published by Cambridge University Press & Assessment (Cambridge International Education).